Ethics Isn’t Pretty(but the alternatives are really ugly)

Executive Summary

Ethics and morality are terms (with Greek and Latin roots respectively) that refer to our efforts to figure out and then do the right thing in business and in other areas of life. In a world of great and growing diversity, six criteria can help us work toward a shared conclusion about what is ethically, morally right. (1) Our laws are not perfect but they represent politically-based judgments about right and wrong behavior; if it’s not legal, it’s probably not ethical. (2) Company and professional codes of ethics must also be taken seriously as guidelines to right and wrong. (3) All human beings have some kind of conscience, moral intuition, or “moral compass”; we need to listen to it in ourselves and others. (4) Golden Rule: treat others the way you would want to be treated. (5) Publicity and transparency: don’t do things that you wouldn’t want on the front page of tomorrow’s newspapers. (6) Bottom line: never do anything that irresponsibly exposes others to serious harm (physical, financial, reputational, etc).

I was always amused when comedian Steve Martin would put on his most serious face and tone of voice and remind us that “comedy isn’t pretty.” Well it’s no joke to say that “ethics isn’t pretty.” Much of the time business ethics is mucking around in this scandal or that. I confess that there are times when I look down the road a few years and fantasize about getting up in the morning and not having to read some more aggravating news stories in the business section (or on the front page) of theWall Street Journal, New York Times, or San Francisco Chronicle. It is depressing to read of another modern day Robber Baron looting his or her corporation (or public utility or state university) while simultaneously stripping basic benefits from his or her workforce. Frustrating to read about corporate lobbying and political contributions defeating legislation that would have helped the people and protected our environment. You know what I’m talking about. Ethics isn’t pretty.

But there is another side to the story and that’s the main theme of this book. To borrow the well-phrased challenge: “it is better to light a candle than to curse the darkness.” My parents constantly drilled into me that I was either going to be “part of the solution or part of the problem.” Ethics is not just (or primarily) about cataloging (and ranting about) the evil, unjust, and ugly. Its historic focus is on the good, the just, and the excellent. Ethics is about excellence. The ancient Greek philosophers actually used one word, arête, for both “moral virtue” and “excellence.” (How and why did we ever separate them?). It doesn’t always get on page one, but there are lots of great examples of ethical, excellent, successful businesses.

So, with this more classical, holistic, positive understanding, ethics can start looking good, actually. Ethics is not just a “patch and repair,” or still less an “identify and blame” enterprise. Nor, let us be clear, is it about a head-in-the-clouds, idealistic “who cares about profits and bottom lines?” attitude. Ethics is about excellence. Ethics is about a robust, big-view, building program for companies that seek to be financially profitable as well as morally praiseworthy, doing well as well as doing right. It is not either/or: either financial success or corporate social responsibility and ethics. No, it is both/and.

Ethics is looking prettier every minute.

Ethics is not just (or primarily) about cataloging and ranting about the evil, unjust, and ugly. Its historic focus is on the good, the just, and the excellent. Ethics is about excellence.

So let’s get clear about our definitional starting points: What is ethics? What is an “ethical business”? What does it mean to “run an organization in an ethical manner”?

“Ethics,” in the most general sense, is about matters of right and wrong, good and bad. It is about what we “ought” to do (our duties, obligations, and responsibilities to do the right thing). Our ethicalvalues andprinciples are our guidelines for addressing these matters of right and wrong. An ethical individual or organization is one that does the right thing (and avoids doing the wrong thing)—or at least it is one thatcaresabout what’s right and makes a good faith effort to do it.

This description still does not go far enough, however. Such a broad use of terms like right, wrong, and ought could still apply to baking a cake or solving mathematical problems (“here is how you ought to solve this equation,” “that’s right!” etc.). We need to get more precise about ethical right and wrong. This is not always a simple task.

In a simpler time and place we might have all agreed that (let’s say) the Bible decides what’s right. Others could agree that the Koran decides it. Or perhaps tradition, common sense, or utilitarian moral philosophy could provide our guide to what is right. But a real problem arises when we are faced with ethical questions and the players are not all from the same tradition or background. Certainly, there is a place for us to express our personal convictions in business ethics, as we shall see below. But we need a shared foundation and one religion alone—or one philosophy—or one political perspective—cannot provide it in our era of diversity.

Welcome to today’s marketplace and workplace: swirling change, driven by technology and globalization, and amazing diversity in ethics and values as in other matters.

“Ethics,” in the most general sense, is about matters of right and wrong, good and bad—figuring it out and carrying it out in the various domains of human experience.

But diversity is no reason to bail out on right and wrong. The stakes are too high. And diversity is not just a challenge—it is also an opportunity and an asset when it means that we can now benefit from multiple ethical perspectives, experiences, and insights. Ethical imperialism will never work; ethical cynicism and apathy, on the other hand, are disastrous. It’s not always pretty and it’s not always easy—but the common pursuit of doing the right thing today is an adventure that is both essential and rewarding.

Nor, we must add, are ambiguity, paradox, or uncertainty reasons to bail out on ethics. Life is complex. Our challenges are thorny. Perfect clarity is elusive. But it is far better to think carefully through our ethical challenges and work hard to come up with the wisest possible resolution than to just shoot from the hip. Sometimes we will feel like we are just “muddling through.” But the pursuit of ethics and excellence lessens our risk of personal and corporate harm and increases our chances of long term, sustainable success.

Six Criteria for Recognizing and Deciding Right & Wrong

So how can we determine ethical right and wrong? How can we find common ground in this world of diversity? In today’s context, six basic test questions can help us recognize, sort out, and resolve the ethical problems we face. Perhaps none of these six litmus tests is sufficient by itself (although the last of the six comes real close); taken together, however, they provide a pretty reliable set of filters (or “foundation stones” if you prefer that metaphor). Our task is simply stated: when should we regard something in business as unethical? Or to phrase it positively, on what grounds could we argue that something is the ethically right thing to do?

The first two of the six test questions are “compliance” questions, i.e., they test whether our actions are in accord with acknowledged, written standards.

First: Does it violate—or comply with—the law? We hope (and often have good reason to think) that our governmental laws are grounded in, and reinforce, what is ethically right. Thus, we have laws that prohibit murder, theft, and libel—and most ethical value systems (like the Ten Commandments or Kantian deontology) also designate these behaviors as wrong. If we see something going on that breaks the law, it is usually ethically as well as legally wrong. Normally, our ethical antennae(along with our legal ones) should perk up if a law is broken. Our laws and regulations are our “social contract” (or “compact”) defining the right way for our basic relationships in our political community. If we think a law is wrong or unethical, we should use the appropriate legislative channels to change it.

The caveat is as follows: throughout history there have been times when something was legal, but was nevertheless unethical (slavery, environmental destruction, taking advantage of a buyer’s feeblemindedness or lack of command of a language, etc.). There are also things that might be unethical and wrong—but that we, nevertheless, decide we can’t or shouldn’t make illegal (e.g., racist attitudes, smoking in private, gambling). So there is not an exact, precise equivalence between law and ethics, but compliance with governmental laws and regulations is the opening test. An ethical organization does its best to know and obey the laws and regulations of its host societies.

Second: Does it violate—or comply with—company (or professional) ethics? Not only governments promulgate standards of behavior (in the form of laws), companies and professions do so as well (in the form of codes of conduct or ethics). The Hippocratic Oath (from about 600-400 B.C.) served for centuries as the statement of professional ethical standards to which physicians were expected to subscribe, no matter whether these ethical standards (e.g., concerning confidentiality, protection of life, etc.) were reinforced by surrounding laws or not. Attorneys, clergy, civil engineers, HR directors, therapists, and CPAs are examples of other professional groups which have attempted, with greater or lesser success, to hold fellow professionals to a clear, high standard of ethics. If you go on-line, it is easy to find the codes of ethics for these and many other professional specializations.

In recent years, many businesses have also developed codes of ethics for their employees. Levi Strauss, Bechtel, Arthur Andersen, Enron, and Ben and Jerry’s are examples (also illustrating the point that merely having such a company code is no guarantee of its observance at all levels). Many company codes of ethics are posted on-line and it is worth some time to visit a few web sites and take a look. Ethical codes and principles spell out “law-like” boundary conditions, but these are based not on the judgments of political authorities but on what members of the profession (or company leaders) think is ethically right. Such professional or company ethical boundary conditions are usually drawn well back from those legal edges we might otherwise trespass.

Obviously, professional and company codes of ethics vary in scope and quality, and may affirm or prohibit activities which, on other grounds, we find unethical or ethical. At their best, however, organizational and professional ethics statements summarize right and wrong in a way that would pass the other five test questions on this list. In any case, non-compliance with (or “violation of”) company or professional codes of ethics is another red flag indicating that we should take a close look at what’s going on. An ethical business complies with corporate and professional ethical standards.

Two Compliance Criteria:An ethical organization does its best to obey the laws and regulations of its host societies. An ethical business complies with corporate and professional ethical standards.

But these two sorts of compliance tests, while the appropriate starting point, are not sufficient. Three other questions will help us catch ethics problems that might slip through the compliance cracks.

Third: Does it violate—or agree with—your (and other’s) conscience and personal values? Of course people sometimes disagree about moral and ethical values. “Don’t impose your moral values on me!” is not an uncommon (or unjustified) sentiment in many cases. People’s consciences and values can be twisted, dulled, inconsistent, conflicted, and unhelpful. Nevertheless, as just one of our six test questions, it is worthwhile to pay attention if you or others are seriously troubled by what is going on. Our internal “moral compass” may be blinking a warning light for good reason as we observe or engage in some action or business practice. If so, pay attention. And if you find that others around you are also very troubled—some would call it a “gut feeling”—by what seems to them unfair, dangerous, or wrong—take it seriously and follow through.

Think of it this way: the first test (the law) is about taking seriously the ethical standards espoused by the larger society or political entity; the second test is about taking seriously the ethical standards espoused by our profession or company; now the third test is about taking seriously the ethical standards espoused by individuals.

This, by the way, is a place where faith, religion, or personal philosophy of life can play positively into the process. If something is going on that violates the clear ethical teaching of your religion or philosophy it may be important for you to share that concern with others. Your religion or philosophy might be helping you to be sensitive to some injustice the rest of us are missing. Speak up! We don’t have to (and indeed can’t) always agree on these things but we could help each other by honestly sharing our values and concerns. An ethical company does its best to respect the consciences and deeply-held values of its stakeholders.

Fourth: Would you like it done to you and yours?This fourth ethics test moves from attitude to behavior. This adds some crucial realism to our questioning. It’s not just “does this bother my conscience” but “would I tolerate this actually being done to me (or my loved ones)?” For example, I might somehow justify selling some dangerous or defective product to others, even though it violated my values and troubled my conscience to some extent. I might still give the “go ahead” sign because I’m uncertain and others are pressing me not to be so uptight. But when you ask me if I would be willing for my daughter or grandson to buy or use that product, some moral clarity emerges: No way! It is not right! This is, of course, the ancient Christian “Golden Rule”: “Do unto others as you would have them do unto you.” Confucius had taught a few centuries earlier the negative version of this: “Do not do to others what you would not want done to you.”

Note well, however, that while my preferences are one valid test, they can not be the only one. It is not always reliable—or right—for us to project our desires and standards onto others. Just because I like to be treated in a certain way does not automatically mean that everyone else wishes for the same. Part of the solution to this possible problem lies in the fact that Jesus taught his Golden Rule to a community, not to some sort of rugged American individualist. By asking our colleagues “how would we like to be treated” rather than just asking myself “how would I like to be treated” we will be on safer ground.An ethical company treats others as it would like to be treated.

Fifth: Would it happen if it was publicized?The fifth test question is sometimes called the “New York Times” test (in our wildly partisan era, we probably need to add a “Fox News” test or a “Wall Street Journal” test to be inclusive enough). The basic question is “would this be going on if it was on the front page of the newspaper” (or the lead story on the evening television news—or the dominating story in the “blogosphere”). This ethics test is not about me and my conscience or desires but about (our reading of) thecommunity conscience and standards. This is actually a classic observation. The Book of Genesis gives the famous story of Adam and Eve fleeing and hiding after they have done something wrong—a pattern repeated ever since. In their recent book, The Naked Corporation, Don Tapscott and David Ticoll argue that transparency requires (and produces) more ethical business behavior.

Of course, there are some things that are actually right and good which we would, nevertheless, not want publicized on the evening news (making love to my spouse, having a heart to heart talk with my colleague, etc.). So the publicity test is not sufficient by itself. But it remains one of six great questions to raise. An ethical company is able to be transparent and defend its actions in public.

Three Basic Business Ethics Standards (beyond compliance)An ethical company does its best to respect the consciences and deeply-held values of its stakeholders. An ethical company treats others as it would like to be treated. An ethical company is able to be transparent and defend its actions in public

Sixth: Could someone be seriously harmed—or will they be helped? In my opinion, the only test question that can stand by itself is this sixth one, regarding potential harm (or help). In the end, even this test question works better if it is linked to the preceding five (which can be seen as five ways of distinguishing harmful and nonharmful behavior). But we really are at the fundamental, bottom line in ethics with this test question. Think about it: what is the difference between breeches of ethicsand breeches ofetiquette (customs, manners)? Answer: breeches of etiquette offend but breeches of ethics harm (or risk harm). It’s the difference between belching and beating someone. Since the ancient Hippocratic Oath, “do no harm” has commonly been called the “first duty of professional ethics.”

Of course, saying that ethical wrong is about “harm” is just the beginning of a debate, not the end. We will have to debate what constitute acceptable risks of harm (knowing that there is no such thing as a completely harm-free, risk-free life) and how this varies for adults and children. We will not all agree on where to draw the line or in our calculations and predictions of harm. But that is ok. The point of ethics is to get the issue on the table. To be ethical is not necessarily to be perfect but to care, to be responsible, in protecting others from harm in its various forms. An ethical company acts responsibly to prevent serious harm to any of its stakeholders.

The Bottom Line Issue in Ethics An ethical company acts responsibly to prevent serious harm to any of its stakeholders.

So we have six basic questions. The first five expose us to the summaries and standards of right and wrong that governments, companies and professions, we and our families and friends, and the larger community have articulated or internalized and embraced in some way. Ethics is partly personal and individual—paying attention to your own conscience and internal moral compass is an important part of it. But ethics is always a social phenomenon as well—standards embraced by communities to guide and govern our relationships. Anthropologists, sociologists, and historians argue that every culture, every social group in history requires some kind of morality to guide its behavior. But it is not quite deep enough to say that ethics is about “generally accepted principles and standards of behavior” (or words to that effect). At rock bottom it is about harm.

Business Ethics and the Harm IssueIt is wrong to knowingly, irresponsibly risk harm (physical, psychological, financial, reputational, relational, etc.) to others (“stakeholders”—those affected by our actions) without their participation in the decision to accept such risk. If no risk of harm or hurt can be established, we are talking about differences of taste and personal preference, not about ethics. Our ethical values, principles, and rules (concerning integrity, honesty, privacy, safety, fidelity, confidentiality, service, and the like) are summaries of important ways we protect each other from harm and act for each other’s good and well-being.

An ethical business or organization, then, is one that is willing to run its operations past the six checkpoints or test questions and which holds itself accountable. One way to describe an ethical organization is to say that it is concerned about, and committed to, doing the right thing—rather than just the profitable thing, thelegal thing (“compliance”), the technologically possible thing, or theeverybody-else-is-doing-it thing. An ethical company wants to do the thing that helps rather thanharms/hurts people and the environment. In the language of good and bad, an ethical company wants to be good for shareholders—but also good forcustomers, good for employees, good forbusiness partners, good for community/neighbors, and good for the environment—good for all itsstakeholders.

An ethical company cares about right and wrong, is willing to discuss it, and will actually do something about it. Companies are not perfect in either discernment or performance. What we are looking for is responsible effort—not perfection.

Defining the “Ethical” Organization“Running a company in an ethical manner” means caring about right and wrong, not just about profits. It means putting (and keeping) ethical values and concerns on the table. It means acting with due diligence and responsibility. It doesn’t mean perfection but it does mean good faith effort.

It is difficult to imagine many people disagreeing with the basic idea that avoiding harm and being ethical are desirable goals. The theory is great. But moving from theory to action is another thing. Many are too busy or too focused on other things to believe ethics deserves their time and attention. Others are cynical and don’t believe that anything can actually be done to improve ethical performance in our “dog-eat-dog” business world.

As we begin this study, some readers may ask how “business ethics” relates to “corporate social responsibility” and “corporate governance,” two terms often heard in similar contexts. These terms do not (yet) have clear and invariable definitions and usages. In the perspective of this book (which sees ethics very broadly and holistically), both are viewed as “subsets” of business ethics. “Corporate social responsibility” (CSR) (along with corporate environmental responsibility) is focused on how companies do (or not) the right thing vis-à-vis their social (and natural) environments. No business ethics worthy of the name fails to care about its social (and environmental) responsibilities. But business ethics is also concerned about doing the right things toward investors, suppliers, governmental agencies, employees, customers and all other stakeholders. The CSR rubric is a worthy focus for organizations but business ethics is (or should be) a broader, more inclusive concern. A company that has a CSR program and emphasis, but no business ethics program, is probably missing something important.

“Corporate governance” refers to the structures, authorities, and procedures by which major strategic decisions are made and directions set in businesses. Corporate governance is about how businesses are to be controlled, guided, influenced, or led so that they behave properly and fulfill their fiduciary and ethical responsibilities. The organization and behavior of corporate boards of directors, as well as executive leadership and internal management of companies, are all part of corporate governance. Government regulations, industry and professional standards and oversight, global business covenants and institutions are sometimes also part of this picture. Business ethics is certainly concerned with these matters, but it is equally (or more) concerned with voluntary, organizational “self-governance” in service of a mission and vision, through ethical values and guidelines, training programs, and the like. Depending primarily or exclusively on legal compulsion or improved board oversight to assure good business behavior can be, by itself, narrow and short-sighted—not a strategy likely to bring out the best up and down the line in a company culture. A company that works hard to improve its corporate governance but has no business ethics program is probably missing something important.

This study cares about corporate governance and corporate social responsibility but the focus is at the business ethics level. In the next chapter, we will examine twelve reasons to take organizational ethics seriously.

“Corporate governance” (which approaches matters more with a top-down strategy of board and regulatory reforms) and “corporate social responsibility” are (roughly) subsets of “business ethics” (which includes but goes beyond their concerns and strategies).

Afterthought: How Do Religion & Philosophy Relate to Business Ethics?

A large majority of people say that they got their basic ethics and values from their religion. Most religious believers say that their ethical values and standards come from God (through inspired, sacred texts like the Bible or Koran and through religious authorities like priests, rabbis, and mullahs). In the six-fold foundation for ethics I have described, religion can play into our expressions of personal values (test three) in a direct way but it is undoubtedly the case that religion has also affected the formation of laws, ethical codes, and social mores and values in profound ways.

We can hope that people in different religious communities will engage in some serious reflection about business and its ethics. There is a lot of potential insight from Judaism, Buddhism, Christianity, Islam and other traditions and it is regrettable that many religious people have not seriously explored what their traditions teach about good work and business. But today’s workplaces and marketplaces are diverse, multi-faith, pluralistic environments. While it is sometimes appropriate for people to share their ethical values and sensitivities with their colleagues, there is never a place for any sort of religious (or ideological) “imperialism” which tries to force everyone into line. Christians, to take one important example, need to remember always that Jesus called his followers to be the “salt of the earth”—not the bulldozers of the earth—the “light of the world,” not the lords of the world.

What about philosophy? Certainly, at the very least, moral philosophy challenges business leaders to think clearly and reason logically. One distinction sometimes made in ethical theory, worth mentioning here at the outset, is between “act” and “rule” theories. “Act” theories say that in every given moment we must decide afresh what is right or wrong (helpful or harmful); by contrast, “rule” theories say that people develop rules that provide general guidance so that we don’t need to review every situation afresh. For example, an “act” ethicist would repeatedly ask, in every given situation, whether it is right to tell the truth or not. A “rule” ethicist would say something like “we should always tell the truth unless doing so clearly leads to harm to another person” (e.g., identifying a hidden runaway slave to a brutal master). As we review the six test questions for ethics, we can see that the two compliance questions are rule-oriented and the four others tend to be more act-oriented.

Not unlike the various religions, philosophical schools (from Chinese philosophy to Plato to Kant to postmodernism) have some valuable insights to share in the business context. But there is no room for philosophical imperialism by any one approach. We can hear and learn from many different perspectives and then work our way forward in the best, most practical way we can to figure out and do the right in the business context.

It should also be said that it is not just traditional, formal religious and philosophical schools and movements that can provide our marketplace with some helpful moral/ethical sensitivity and insight. Feminism, ethnic and social identity and liberation movements, therapeutic and psychological traditions, environmentalism, self-help movements, and other affinity groups and movements have something to offer as well in the ethics domain. We are potential losers if we banish their adherents and practitioners from contributing their ethical insights.

In all cases, we must express our ethical concerns and values in ways that are respectful of others and that contribute to a positive, collective result. If an individual cannot in conscience participate in a consensus resolution, it may be time for them to find another job where their personal values will be more comfortable.

For reflection or discussion:

How would you define “ethics” and “an ethical company”?

How would you rank the helpfulness and importance of each of the six test questions for ethics given in this chapter? Can you suggest any other questions or guidelines for deciding on right and wrong?

How would you describe your own personal moral compass as it relates to the business environment? Do you have a clear and articulate sense of your core values and principles? Can you defend your position and give reasons why you adhere to it?

Exercises:

Ask a couple business colleagues or friends how their personal ethics and business ethics are the same—and/or different?

Over the coming week, pay special attention to the ethical aspects of the business news as you read (or watch or listen to) it. What seem to be the important issues of business right and wrong this week?

Resources for further study

The easiest and quickest way to broaden one’s introductory knowledge of business ethics is to do an internet search and visit some of the good web sites devoted to this topic. The Ethics Resource Center (www.ethics.org), the Institute for Business Ethics (www.ibe.org.uk) and the Markkula Center at Santa Clara University (www.scu.edu/ethics/practicing/focusareas/business) are three great web sites with abundant resources on business ethics.

One of the best business ethics textbooks is Managing Business Ethics: Straight Talk About How to Do It Right by Linda K. Trevino and Katherine A. Nelson (John Wiley & Sons, 4th edition, 2007). Their approach is broad, holistic, deep, and practical (rarely can one use all four of those adjectives about one business ethics textbook). Their textbook includes lots of cases and discussions.

Two of the better collections of articles on topics in business ethics are the Harvard Business Review’sCorporate Ethics (Harvard Business School Press, 2003) and The Blackwell Guide to Business Ethics edited by Norman E. Bowie (Blackwell Publishers, 2002). In coming chapters (below), other books on particular aspects of business ethics will be mentioned.

For those interested, Edward D. Zinbarg’s Faith, Morals, and Money: What the World’s Religions Tell Us About Ethics in the Marketplace (Continuum, 2001) gives a fair and even-handed introduction and overview of what Judaism, Christianity, Islam, Hinduism, Buddhism, and Confucianism teach about sales, product safety, financial ethics, corporate governance and other topics.